Surviving The Assault on Private Sector Careers in America

Decoding Obama’s March 2010 Unemployment Report

DJH: Tomorrow is “report card day” for Barrack Obama. It’s the day we see the unemployment report for March. I know it won’t be good. The only question is how successful will Team Obama be at sugarcoating some very ugly numbers and fooling an increasingly impatient American public.

I say report card day because I believe that the national unemployment rate is one of five key metrics that a president cannot hide from (the other four being The Dow Jones Industrial Average, The Rate of Inflation/The Price of a Gallon of Gas, The GDP Growth Rate, and The Deficit).

Just because I say that the president can’t hide from these key metrics doesn’t mean he won’t try! So, be ready for a rosy headline tomorrow morning, but then use this post as your own personal “decoder ring.”

Government Manipulation of The Unemployment Rate

We have become conditioned to thinking about the unemployment rate as a single piece of data. Did you know that there are actually 6 different classes of unemployed in America?

U1 — The percentage of the labor force that is unemployed 15 weeks or longer

U2 — The percentage of the labor force for the previous month who lost their jobs or have completed temporary work such as the Consensus employees that are hired this year to take the consensus, they are not permanent employees and when they fall off the payroll they will show up in U2. You can consider U2 as “Those who lost their jobs” whether fired, laid off, or completed temporary work.

U3 — This is the official released data which the news focuses on and retail investors as many are unaware that there are additional levels and measures of unemployment. U3 is the percentage of the Civilian labor force that is unemployed AND actively seeking work.

U4 — Is the same as U3 but adds what are termed as “Discouraged Workers”. Typically this addition of “Discouraged Workers” is an almost insignificant addition to the U3 numer rate, typically accounting for a few tenths of a percentage point.

U5 — Is the U4 rate (discouraged workers) and adds to the tally what is termed as “Marginally Attached Workers” or those that would like to work, but have given up seeking employment for a number of different reasons. Discouraged workers include those that believe the search for work is futile are considered “discouraged workers”, those that have rea sons -any reason beyond that, are put into the broader classification of “marginally attached”.

U6 — Adds “part time workers” -an hour a week will do it, but those that wish to be gainfully, full-time employees.

During the great depression, the widely reported unemployment rate of 24.6% was actually the same way today’s U6 unemployment rate is. Comparing last month’s 9.7% unemployment rate “headline number” to 24.6% doesn’t sound so bad — except for one problem; the February 9.7% unemployment rate was for the U3 not the U6 class of unemployment.

Last month the U6 unemployment rate was a staggering 16.8%, which was the all time high since the great depression. In fact, some experts claim that today’s unemployment rate is just as bad as the great depression because back then there was a much larger portion of the population living and working on farms, which fall outside of these statistics.
The groundwork for manipulating the unemployment rate began in 1994 when Bill Clinton began the current protocol of reporting the U3 number as the “official unemployment rate.” In switching to U3, Clinton began a tradition that enabled the president to manipulate the unemployment rate by “tweaking” the definition of “actively looking for work.” Those who are not actively looking for work are considered “discouraged workers.” They are still tracked, but the numbers are buried in the bowels of the press release.

While it’s true that Clinton and Bush fiddled with these numbers from time-to-time, the gap between U3 and U6 was never more than 2-3% points. But now, under the rule of Barrack Obama, that gap has skyrocketed to 8%+ (February’sU3 was 9.7 and U6 was 16.8).

Obama's Greatest Success -- The Growth in Discouraged Workers

So the first thing to look for tomorrow is the U6 rate and how it’s changed.

The Assault Continues

The second thing to look for is something I call “organic job growth” (or decline). I’m talking about jobs that have been created (or destroyed) by the health of the economy. I do not considered government stimulus “make work” jobs part of organic job growth, because they aren’t!

Growth in Unemployment Benefits

“Many of those job gains will be a result of temporary government hiring to conduct the 2010 Census.”

“More than 6 million people were on the extended benefit rolls for the week ended March 13, the latest data available. That is about 270,000 higher than the previous week.”

So the second thing you’ll want to “decode” tomorrow morning is the change in the number of people actually claiming unemployment benefits. Sorry, but I think that if we had 270,000 American’s claiming unemployment benefits last week for the first time, at least 270,000 more Americans lost their job the week before that!

Real Private Sector Jobs Continue to Tank

Take a minute and study this chart. The US economy lost jobs in every single private sector category except services and within services, most of the growth came from small business. Folks, we’re talking low pay, low benefit jobs here.

And here’s what the experts said about the ADP report:

“Big losers in the ADP report were the construction industry, which lost 43,000 jobs in March, and factories, which shed 9,000 jobs…”

How’s that “shovel ready” stimulus plan working out for construction workers?

“While many are waiting for Friday’s payroll figure to tell them the state of the U.S. labor market, I’m going to rely on today’s ADP report as a better gauge,” wrote Miller Tabak equity strategist Peter Boockvar. “That is because it is private-sector based and thus won’t be distorted by the likely 100,000-plus addition of government census workers.”

Your final tip for decoding Obama’s March Employment report is to look at the categories of jobs and see how they changed since February. What happened to good paying American private sector jobs that actually produce something?

And if I’m right (which I usually am), prepare to hear yet another big lie about job growth in America!